MUHAMMAD RIAZ, ACCOUNTANT MEMBER.---This second appeal is directed against the order dated 29-04-2013 of Commissioner Inland Revenue (Appeals-III), Islamabad passed in 1st appeal filed by the taxpayer against the amended assessment order passed by the Assistant Commissioner Inland Revenue (ACIR), Audit-I, Zone-II, RTO, Rawalpindi under section 121(1)(d) of the Income Tax Ordinance, 2001.
2. Brief facts of the case are that the taxpayer an individual derived income from Engineering Works. Return of income for the year under consideration was filed declaring net income at Rs,125,000/-. The case of the taxpayer was selected for Audit under section 177 of the Ordinance and he was required to produce books of accounts and related documents. As per impugned order all the notices went un-complied with. The officer therefore, proceeded to assess income of the taxpayer by disallowing A receipts at Rs,950,000/- and the expenses claimed in the P&L account at Rs,52,00/-. Thus the total income was assessed at Rs,1,002,00/-.
3. Being aggrieved the order of amendment of assessment was challenged by the taxpayer in appeal filed before the 1st appellate authority. The appeal of the taxpayer was rejected by the CIR(A), against which the taxpayer is in 2nd appeal before this tribunal on the following grounds:-- GROUNDS:-
(i) That the orders of both the officers below are arbitrary, unjustified and un-called for.
(ii) That the selection of the case for audit under section 177 of the Income Tax Ordinance, 2001 by the Commissioner Inland Revenue, RTO, Rawalpindi was not justified as has been held by the Honorable High Court in a case reported as: 2012 PTD 1815.
(iii)That the income assessed at Rs, 1,000,000/- against declared at Rs, 125,000/- by the AC Inland Revenue is highly excessive and the learned Commissioner Inland Revenue (Appeals) is not justified to confirm its.
(iv) That assessment was made ex parte under section 121(1) (d) of the Income Tax Ordinance, 2001 which was sent through courier was not served upon the appellant. As such the assessment made is illegal.
(v) That more grounds would be submitted on or before the hearing of appeal.
The appellant has also filed additional grounds which are reproduced as hereunder:-
(i) That the order passed by the Assistant Commissioner Inland Revenue (Audit-l), Zone-II, RTO, Rawalpindi and upheld by CIR (A) is not a best judgment assessment under section 121(1) of the Income Tax Ordinance, 2001 (the Ordinance) as such legally not sustainable. The income / receipts assessed are not based on any information or material available on record.
(ii)That the order of CIR(A) is based on misconception that assessing officer disallowed receipts at Rs, 950,000/- whereas, the total receipts declared were Rs,177,000/- against which total expenses were claimed at Rs,52,000/- and thus income of Rs, 125,000/- was declared by the appellant.
(iii)That the assessment made by the assessing officer and the order, passed by the CIRCA) without considering the facts of the case available on record particularly total consumption of electricity of 164 units of the value of Rs,5,051/- consumed during the whole year while estimating receipts of Rs,950,000/-.
(iv) That the disallowance of total expenses ignoring the facts available on record is unjustified which even otherwise is not sustainable being unreasonable since no business without any expenses is possible.
(v) That the above grounds going to the roots of the case and need no further verification hence be accepted and both the orders of CIR(A) as well as of assessing officer passed under section 121(1)(d) of the Ordinance may kindly be vacated and declared income deemed to be assessed under section 120 of the Ordinance may kindly be restored.
4. In response to call notice Mr. Atif Waheed, Advocate, AR appeared for the appellant taxpayer, while the revenue was represented by Mr. Tauqir Ahmed DR. The man argument of learned AR is that very small business was done during the period under consideration which fact was evident from the consumption of nominal electricity mostly of minimum bills during the whole year.
According to learned AR the taxpayer remained ill for a long period and remained on bed and he ultimately died in hospital on 13-07-2013. A copy of death certificate was also produced by him.
Learned AR further contended that the estimation of receipts and income was without any information or material is based merely a guess work. Learned AR stated that because of the illness of taxpayer the business premises mainly remained closed because of which no notices were received by him.
5. Another argument of learned AR is that the order passed on the other day without closing the proceedings on the date of hearing was legally not sustainable. Learned AP also contended that the selection of the case for audit for the Tax Year 2010 by the Commissioner was unjustified and illegal. In support of his argument learned AR cited the case law 2012 PTD 1815 (Lahore High Court), 2013 PTD 1552 Peshawar High Court), Copy of judgment dated 26-02-2015 of Peshawar High Court in W.P. No, 3122/2014, Copy of judgment of Lahore High Court Rawalpindi Bench, Rawalpindi W.P. No, 475/2013 dated 28-04-2014, Copy of Orders of Tribunal in I.T.A. No, 258/IB/2013 (Tax Year 2010) dated 09-06-2016 and I.T.A. No, 259/IB/2013 (Tax Year 2010) dated 05-11-2015.
6. Learned. DR in his arguments defended the orders of the two authorities below on the same grounds as mentioned therein.
7. Arguments of learned representatives of both the parties have been heard and facts of the case have also been taken into consideration. After taking into consideration the facts of the case particularly the quantum of electricity used during the year we are of the opinion that the income assessed by the ACIR is not justified. The estimation of receipts is not based on any information or material. Further the assessing officer after estimating his own receipts against declared by the taxpayer has added the expenses claimed without first deducting the same which reflects the non-application of his mind. Considering the overall facts of the case the impugned order passed by the ACIR could not be held a best judgment assessment. As a result both the order passed by the ACIR under section 121(1)(d) for the Tax Year 2010 as well as of Commissioner Inland Revenue (Appeals) are hereby vacated. Relief having been allowed as above the remaining grounds are needed not to be adjudicated.
8. The appeal of the taxpayer succeeds in the manner as indicated above.